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Journal entry — Federal Appellate Court upholds partial stay of conflict minerals rule

Published on: Aug 19, 2015

Yesterday, the U.S. Court of Appeals for the District of Columbia Circuit (the “Appellate Court”) upheld its April 2014 ruling that parts of the SEC’s conflict minerals rule and of Section 1502 of the Dodd-Frank Act1 violate the First Amendment to the extent that they require issuers to disclose that their products have “not been found to be ‘DRC conflict free.’ ” The Appellate Court agreed to review its April 2014 ruling in light of a separate case involving country-of-origin labeling of meat products.

Editor’s Note: On April 14, 2014, the Appellate Court held that parts of the SEC’s conflict minerals rule and of Section 1502 of the Dodd-Frank Act violate the First Amendment and remanded the case to the district court. Later that month, the SEC staff issued guidance indicating that registrants would not be required to identify any products as having “not been found to be ‘DRC conflict free’ ” or as being “DRC conflict undeterminable.” Registrants could still elect to identify products as “DRC conflict free,” but those doing so would be required to obtain an independent private sector audit (IPSA). On May 2, 2014, the SEC issued a stay of the effective date of those portions of its conflict minerals rule that the Appellate Court deemed unconstitutional.

The Appellate Court also questioned the objective of the conflict minerals rule and whether it was indeed helping to improve the situation in the region it is intended to benefit.

The SEC is currently reviewing the Appellate Court’s decision, and final resolution of the legal action remains uncertain. Accordingly, registrants should consult with their SEC counsel to determine whether and, if so, when an IPSA is required in light of (1) the SEC staff’s April 2014 guidance, (2) the expiration, for many registrants, of the conflict mineral rule’s temporary transition period after the 2014 calendar-year filings, and (3) yesterday’s Appellate Court ruling.


1 The Dodd-Frank Wall Street Reform and Consumer Protection Act.

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